Cryptocurrency trading, better known as crypto trading, is a type of trading that involves exchanging one cryptocurrency for another, buying and selling coins, and exchanging fiat money into cryptocurrency. This concept is the same as the real-world stock exchange. However, the cryptocurrency markets are very volatile.
The most important thing to bear in mind before you start trading is that there is a risk you could lose your entire investment. Narratively, you should never trade with any amount that you cannot afford to lose.
Here are great tips you must know before getting into cryptocurrency trading. First of all, you need to understand that profitable trading requires a lot of attentiveness; it is not a gamble, nor should it ever be one. With that, let’s begin!
Understand the Theoretical Aspect
Before you begin to trade cryptocurrencies, it is vital for you to understand the theory behind cryptocurrencies. Be sure to understand Technical Analysis and all other trading terms that you will come across when you start trading. Not forgetting, it is also important for you to keep yourself updated with all the latest happenings in the crypto sphere. Kindly subscribe our newsletter and check our daily news update to get notified about what’s going on, such as the trends of the cryptocurrencies, their prices and the news surrounding the cryptocurrency world.
Set Profit Targets and Make Use of Stop Losses
Every trade we get into requires us to know when the right time is to get out, whether we are making a profit or otherwise. Choosing a clear stop loss level helps you to cut your losses. A stop-loss order is placed with a broker to buy and sell a security when it reaches a certain price. When a stock falls below the stop price, the order becomes a market order and it executes at the next available price. For example, a trader may buy a stock and places a stop-loss order ten per cent below the purchase price. Should the stock drop, the stop-loss order would be activated, and the stock would be sold as a market order. While the profit target level is the upper limit that you will set for you to automatically cash out of a trade once it hits a certain point so that you can get a definite profit out of the trade.
Manage Your Risks
Remember, you are not the only one who wants to profit from cryptocurrency trading. The volatility of the cryptocurrency market means that any trade, even a seemingly perfect trade, can collapse and result in a significant loss. No matter how promising and tempting a particular trade opportunity may appear, it is never a good idea to place all of your worth on the line.
Rather than aiming for large one-time payoffs and huge profits, aim for several small profits over the course of a long time. Make sure that your risk management is on point. Do not wait around for that big profit or you might end up going home with big losses instead.
Underlying Assets Create Volatile Market Conditions
Basically, the price of most altcoins depends on the current Bitcoin market price. It is essential to understand that Bitcoin is relative to fiat currency and very volatile. Simply put, when the Bitcoin price goes up, the value of altcoins goes down and vice versa. If you are thinking of going long term with cryptocurrencies, consider investing in some of the following coins: Ethereum (ETH), Ripple (XRP), Litecoin (LTC) and Monero (XMR).
Don’t Buy Simply Because the Price is Low
Most beginners always make one common mistake: buying a coin because its price seems to be low or considered affordable. For instance, one who goes for Ripple instead of Ethereum simply because the latter is much cheaper. The decision to invest in a coin should have very little to do with its affordability but a lot to do with its market capitalization. The higher a coin’s market cap, the more suitable it is for investment.
A week in the crypto market is equivalent to three months in the traditional capital stock exchange, in terms of events and occurrences. One who wants to jump right into the deep water of crypto trading has to follow it not just on a daily basis, but on hourly basis. It is not a game to be played by everyone. Nevertheless, you need to consider the amount of time invested in the process. Sometimes it pays off to be a long-term investor, rather than a daily trader. By the way, as a daily trader, it does not necessarily mean you are bound to buy and sell and trade every single day. Trades can reach their destination within minutes, as well as within months. Think about the time you are willing to invest in studying and tracking the market. Remember your time has marginal cost, or in other words — your time has a price tag. If you have decided to put your time and effort into trading on a daily basis, it is better to start with small doses and analyze the performance prior to increasing invested amounts.
Our Two ‘Sats’
Before trading any amount, you must have a clear idea of what your investment goals are. Don’t start trading until you are certain that you can be decisive in terms of getting in and out of a trade.
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A keen researcher who believes in enriching her knowledge. For Shuhada, the crypto world intrigues her sense and offers plenty of high delicious 'crypto cuisines'.